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To any sane person who has a grasp of what is presently occurring, it is obvious that the current state of affairs is unsustainable. The question is how long can the monetary captains’ misguided policies keep us off the shoals of our economic destruction. How long can policies of “extend and pretend”, “kick the can down the road” or “fake it until you make it” continue? The answer is unknowable but…when something is UNSUSTAINABLE it is INEVITABLE that it will END. TIME is the only unknown. The certainty of it ending BADLY is not. Words: 1265; Charts: 6
So writes Gordon T. Long (www.GordonTLong.com) in an edited excerpt from his original article* entitled 2012 Calm Before Stock Market Storm 2013.
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Long goes on to say in further edited excerpts:
“Red Sky at Night, Sailors Delight, Red Sky in the Morning, Sailors take Warning!”
We have a new era dawning in global monetary policy. It is a new day with the monetary skies already red….
The Doomed Middle Class
The engine of prosperity is small business and a strong middle class [yet] the economic foundation is presently under unprecedented assault. In the last 15 years, the shift from
defined to contributory benefits,
a housing collapse,
exploding education costs,
a crushing shrinkage in real dispoable income, and
growing ‘financial insecurity’,
have left the U.S. middle class paralyzed.
Growing Social Stress
a) Equality and Fairness has been Broken
the growing hoards of frustrated and unemployed youth,
the worried retirees unable to garner any earnings on their life’s retirement savings,
the increasing ranks of “part time worker”,
the squeezed employed worker with lost or reduced benefits and
the unmatched cost of lving increases,
there is a historic disparity between the “haves and have nots”. Corporate profits are at record levels against GDP, while labor against GDP continues to plummet. There is a palpable sense of inequality and unfairness.
b) The Rule of Law is in Jeopardy and the U.S. Constitution is in Peril
Our transition from more-or-less free country to police state is accelerating.
The NSA’s Utah Data Mining facility,
Ever-tighter restrictions on offshore accounts,
The internet “Kill Switch”,
The Patriot Act’s many assaults on the Bill of Rights,
The militarization of local police, (wquipment, FEMA graduates, the new NDAA’s “indefinite detention without trial”)
The spread of drones for domestic surveillance (FAA planning for 30,000 by 2020)
Each [of the above] has a role in the high-tech updating [of] a very old idea that the state is paramount and the individual a slave to public order and national power and it’s happening now instead of the 1950s because we’re reaping the whirlwind that always accompanies fiat currency. We created a central bank in 1913 and freed it from the constraint of gold in 1971. Give the government or the large banks the power to create money out of thin air and you eventually create a dictatorship. “Eventually” just happens to be now.
c) The Social Contract is Breaking Down
The political foundation of the status quo in America is based on a grand bargain of complicity between the top 25% who pay approximately 90% of the taxes, and the bottom 50% who draw on the benefits that stem from government. James Madison, in the “Federalist Papers”, outlined this complicity in the “Tyranny of the Majority”. What is becoming painfully evident is that the political elite in America have falsely over-promised on the entitlements that can be delivered which surfaced in the political turmoil of the fiscal cliff negotiations and has the potential to quickly lead towards a constitutional crisis.
This grand bargain is now rapidly fraying as 75 million baby boomers begin retirement and find that the promises made to everyone cannot possibly be met. As the fiscal cliff crisis highlighted, for those who can read between the carefully crafted lines, funding for Social Security, Medicare/Medicaid, national security and interest on the debt is consuming more than can be realistically raised through taxation.
To collect enough tax revenue to avoid deeper debt levels would require over $8 trillion in tax collections annually. [To put things in perspective,] expropriating the entire income of the top 25% of households that pay almost 90% of the tax and all corporate taxes would only bring in $6.7 trillion.
“The actual liabilities of the federal government — including Social Security, Medicare, and federal employees’ future retirement benefits — already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion”. Chris Cox and Bill Archer, Former Congressmen – WSJ 11-26-12
Claims on welfare and disability programs are skyrocketing at the same time that the demographics of an aging populace are causing 10,000 people a day to enter Social Security and Medicare, the two costliest government programs. Meanwhile, the upper-middle class that pays most of the taxes has been slammed with lower income and a devastating drop in their housing-based net worth. Compounding this is the fact that the disillusioned wealthy have slowed dramatically their invested CAPEX (capital expenditures) in productive assets in the U.S..
The 2008 financial crisis, which quickly morphed into a global economic crisis, is now entering the political instability phase where the broken grand bargain and social contract is going to greatly impact the attempts by the global captains of monetary, fiscal and public policy to steer a safe course.
FINANCIAL > ECONOMIC > POLITICAL = SOCIAL CONTRACT
d) Democracies are Becoming Ungovernable
As a larger percentage of the public becomes dependent on government entitlements, transfer payments and employment, the helm will be pulled from the policy captains’ hands. Austerity only works conceptually and as long as it doesn’t impact anyone directly. Obviously, this cannot be the case. [The] U.K.’s Prime Minsiter Cameron was elected on a platform of austerity [yet] when it came to implementation, it became quite a different matter.
The democratic system becomes ungovernable when unsound money is sustained for any period of time. It is the virus that silently cripples it.
The Looming Adjustment
The financialization, securitization and rehtpothecation of almost all our systems, the explosion of an unregulated, offshore, off balance sheet, off exchange and opaque $639 trillion SWAPS markets, along with a $67 trillion shadow banking system on a $70 trillion global conomy should beg some questions.
The complexity of the interwined and interdependent global financial systems gives us a clue [as] to what lies ahead.
These systems are fragile and not robust.
They have never been stress tested.
They were never designed, but rather evolved in Darwinian fashion.
Minor set backs and adjustments simply allowed for more layers of complexity to be rapidly and randomly added.
So far, there has not been a catastrophic collapse [but] the probability of this not occurring is diminishing exponentially. It will occur. It is only a matter of time. The internet and potential cyber attacks almost guarantee a triggering event.
Market Signals Are “Bright Red“
2012: Calm Before the Storm
2013-2015: A Market Clearing Event
2016: Sorting through the Debris
To any sane person who has a grasp of what is presently occurring, it is obvious that the current state of affairs is unsustainable. The question is how long can the monetary captains’ misguided policies keep us off the shoals of our economic destruction. How long can policies of “extend and pretend”, kick the can down the road” or “fake it until you make it” continue? The answer is…unknowable, the certainty of it ending badly is not.
*http://www.marketoracle.co.uk/Article38204.html (Sign Up for our FREE 2013 Thesis Report.)
[Editor’s Note: The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
Those dependent on the welfare state are unaware that their benefits are not sustainable. Most believe tomorrow will be like today and the checks will keep coming from Mother Government. Political power was gained based on promising these benefits. No politician will risk his position by trying to reduce them. No democratic society has ever rolled them back via peaceful political means. [At worst,] the economy and society could end up in ashes [and, at best,] the world is in for a long period of stagnation, retrogression and conflict. [Let me explain more fully.] Words: 1115
The level of debt has surpassed the possibilities of being serviced. Mathematically, the debt problem cannot be solved, regardless of economic policies. That, unfortunately, is written. For it to be serviceable would be to violate the laws of mathematics and that cannot happen. [As such, America is quickly approaching a catastrophic economic collapse. As repelling as that sounds, it’s in your own best interest to learn just how bad the situation is. This article is an attempt to do just that.] Words: 310
In order to generate phony economic growth and to “pay” our country’s debts in the most dishonest manner possible, the Federal Reserve is 100% committed to the destruction of the dollar. Anyone with wealth in the U.S. dollar should be concerned that economic leadership is firmly in the hands of irresponsible bureaucrats who are committed to an ivory tower version of reality that bears no resemblance to the world as it really is. By upping the ante once again in its gamble to revive the lethargic economy through monetary action, the Federal Reserve’s Open Market Committee is now compelling the rest of us to buy into a game that we may not be able to afford. Words: 1410
I keep wondering to myself, do our money-printing central banks and their cheerleaders understand the full consequences of the monetary debasement they continue to engineer? [Below is what I think awaits us.] Words: 1013
Timing the U.S. debt implosion in advance is virtually impossible. Thus far, we’ve managed to [avoid such an event], however, this will not always be the case. If the U.S. does not deal with its debt problems now, we’re guaranteed to go the way of the PIIGS, along with an episode of hyperinflation. That is THE issue for the U.S., as this situation would affect every man woman and child living in this country. [Let me explain further.] Words: 495
For over two years now, I’ve been warning that the 2008 Crash was just a warm up and that the REAL Crisis would occur when the stock market realized that the Central Banks, lead by the US Federal Reserve could NOT actually hold the financial system together. Well, the Crisis I’ve been warning about is here. [Let me explain.] Words: 306
“World Debt 101″ examines some of the world’s largest economies and illustrates just how much they have borrowed and what measures many of their governments are now taking to curb spending and narrow those deficits.
Many articles are being written these days that more or less scope the dire financial circumstances the U.S. is in. That being said, I had not been able to find one “analyst” – even one – who had the guts to outline the probable outcome and general hopelessness of the situation and to offer any meaningful prescription for investors to survive this coming catastrophe – until now. Words: 710
Financial repression occurs when governments channel funds into their own sovereign bonds in order to reduce debt levels through mechanisms such as directed lending, caps on interest rates, capital controls, debt monetization, or by other means. The promise of financial repression is that it will hold down government borrowing costs and reduce government debt levels, but critics argue that financial repression merely targets the producers of society, i.e., the middle class, and therefore harms the economy. Let’s take a look at financial repression ands its supposed pros and cons. Words: 1486
This is the scenario nobody thinks is possible but really at the end of the day, it’s not like the US can print money and live on debt forever right so when something cannot go on forever what happens when it stops?
As Ayn Rand said “We can ignore reality, but we cannot ignore the consequences of ignoring reality” so, with apologies to Ayn Rand, let’s explore some examples of ignoring reality. (Words: 1132; Charts: 1)
We are on the precipice of enormous financial and economic change. It is not change for the good, especially for the United States. Excesses and mis-allocated resources of several generations are about to be exposed as modern industrial nations sink deeper into the economic hole they have dug for themselves. The purging of these economic mistakes will be painful, could create new wars as politicians attempt to deflect blame and may end up changing the political form of government in some countries. (Words: 364; Charts: 1)
Although our supposed leaders are presumably highly intelligent, educated, and knowledgeable, they act largely “brain-dead” as they lead the United States down an unsustainable path that guarantees eventual catastrophic financial destruction. Do you own enough gold and silver that you would feel safe in a such a financial melt-down? If not, why not? Words: 817
What would happen if someday the rest of the world decides to reject the U.S. dollar and that process suddenly reversed and a tsunami of U.S. dollars come flooding back to this country? It is frightening to think about. Just take a moment and think of the worst superstorm that you can possibly imagine, and then replace every drop of rain with a dollar bill. The giant currency superstorm that will eventually hit this nation will be far worse than that.
People riding a runaway train can party and remain oblivious to the fact that the train is about to crash into a huge obstacle. Our runaway financial train is about to destroy the status quo as it crashes into the obstacle of mathematical consequences – the inevitable financial train wreck. “If something cannot go on forever, it will stop.” [Let me explain.] Words: 974
It is relatively easy to predict further commodity price inflation as a result of the massive money printing going on worldwide and that hard assets, not paper assets, will help protect purchasing power but it is much more difficult to project where else this money printing leads and to what extent a crash is inevitable. What is the endgame? Will it be another financial crash such as in 2008 or will it be a more destructive financial and economic crash that causes a severe but temporary disruption in the delivery of goods and services? Words: 1470
The internet is awash (drowning?) in hundreds of doom and gloom videos providing dire warnings of coming world depression, food shortages, rioting in the streets, rampant (hyper) inflation, deepening banking crisis, economic apocalypse, financial Armageddon, the demise of America – well, you get the idea. Below is a small sample of such videos with a hyperlink to each.
For those who didn’t get the memo, TEOTWAWKI stands for “the end of the world as we know it” and that is what David Korowicz predicts – a disaster of unprecedented proportions sometime this decade – an “ultimate” crash that will be irreversible – that will be TEOTWAWKI! Words: 1395
Something really strange appears to be happening. All over the globe, governments and big banks are acting as if they are anticipating an imminent financial collapse. Here’s some of what is being said and is apparently happening. Words: 1200
Many people refer to me as a “doom and gloomer” because I run a website called “The Economic Collapse”. [Just because] I am constantly pointing out that the entire world is heading for a complete and total financial nightmare, [however,] I don’t think that it does any good to stick your head in the sand. I believe that there is hope in understanding what is happening and I believe that there is hope in getting prepared. [This article does just that.] Words: 2432
Governments everywhere are becoming more distressed and desperate as economic realities dominate the political doublespeak. The world is at a dangerous point. Much of what we thought we knew and assumed regarding governmental behavior and economics is beginning to be reassessed. Governments of the world are out of money and out of ideas. The ponzi scam that has been perpetrated for over fifty years is collapsing under its own weight. There are not enough suckers and capital left to sustain the fraud. [Let me explain further.] Words: 999
Warning: New evidence points toward an imminent financial collapse and the destruction of American wealth. Income, investments, retirement, and even personal safety are now at severe risk. In this new video I lay it all out for you. Words: 515
The deficits aren’t going to stop anytime soon. The debt mountain will keep growing…Obviously, the debt can’t keep growing faster than the economy forever, but the people in charge do seem determined to find out just how far they can push things….The only way for the politicians to buy time will be through price inflation, to reduce the real burden of the debt, and whether they admit it or not, inflation is what they will be praying for….[and] the Federal Reserve will hear their prayer. When will the economy reach the wall toward which it is headed? Not soon, I believe, but in the meantime there will be plenty of excitement. [Let me explain what I expect to unfold.] Words: 1833
…The US Government and its catastrophic fiscal morass are now viewed by the world as a ‘safe haven’. This would easily qualify for a comedy shtick if it weren’t so serious….[but] the establishment is thrilled with these developments because it helps maintain the status quo of the dollar standard era. However, there are some serious ramifications that few are paying attention to and are getting almost zero coverage from traditional media. [Let me explain what they are.] Words: 1150
With the U.S. election just months off, political pressures will mount to favor fiscal stimulus measures instead of restraint. Such action can only accelerate higher domestic inflation and intensified dollar debasement culminating in a Great Collapse – a hyperinflationary great depression – by 2014. [Let me explain why that is the inevitable outcome.] Words: 2766
Whether our current economic crisis will end with massive inflation or in a deflationary spiral (ultimately, either one results in a Depression) is more than an academic one. It is the single most important variable for near and intermediate term investing success. It is also important in regard to taking actions which can prepare and protect you and your family. [Here is my assessment of what the future outcome will likely be and why.] Words: 1441
Daniel Thornton, an economist at the Federal Reserve Bank of St. Louis, argues that the Fed’s policy of providing liquidity has “enormous potential to increase the money supply,” resulting in what The Wall Street Journal’s Real Time Economics blog calls “an inflation inferno.” [Personally,] I think it’s too soon to make significant changes to a portfolio based on inflation fears. Here’s why. Words: 550
The developed economies of the world have opened the money spigots…[and this] massive money and credit creation is sitting in the banking system like dry tinder just waiting for a spark to set it ablaze. How quickly it happens is anyone’s guess, but once it does we are likely to be enveloped in a worldwide inflation unlike anything before ever witnessed. [Let me explain further.] Words: 625
LOOK! Everyone needs to see this. United States owes a lot of money. As of 2012, US debt is larger than the size of the economy. The debt ceiling is currently set at $16.394 Trillion, estimated to be hit around Sep 14, 2012. In the infographic below that enormous amount is illustrated in $100 bills. It’s frightening! Words: 605
The U.S. already has more government debt per capita than the PIIGS (Portugal, Italy, Ireland, Greece and Spain) do and it just keeps getting worse and worse thanks to both political parties. We are on the road to national financial oblivion yet most Americans don’t seem to care. They don’t realize that we have enjoyed the greatest prosperity we will ever see…and that when the debt bubble bursts there is going to be an immense amount of pain. That is a very painful truth, but it is better to come to grips with it now than be blindsided by it later. [Let me explain.] Words: 1140
Even as I write these words, the world’s largest economy — the E.U. — is coming unglued at the seams, the world’s second largest — the U.S. — is careening headlong toward a fiscal cliff that promises to gut its GDP, nearly all of Asia — including Japan, China and India — is slowing…and yet most investors still don’t get the message. [Let me go on to explain just what that message is.] Words: 1357
[You are being forwarned – again – that Europe and the U.S. are now on a collision course with a second Lehman-type megashock….A snowball of events – bank runs spreading across Europe – are bringing us a few steps closer. What [can we expect] next? Let me explain. Words: 1795
This short video – on the sustainability of government spending – should be watched by everyone, including those not yet old enough to vote. It should be shown in every high school and college classroom.
Investment “rules” that were relevant for a century are obsolete. They were based on a world where economies grew, people’s standard of living increased and outcomes tomorrow better than today. Arguably each of these conditions will not hold in the future but if they don’t, neither do the rules of thumb that guided investing last century. These guiding principles developed and worked in a world that that no longer exists but applying them in the future will result in devastating financial outcomes. [Let me explain.] Words: 1261
The world is hurdling toward what seems to be certain economic collapse so, if your expectations are similar to mine, then you should be exploring ways to prepare for something that eventually will become an economic dark age. Investment performance is always relevant and it has never been more important than in these difficult economic times – nor has it ever been more difficult. Markets have already changed and are getting worse…As the economy worsens, market movements [like the two 50% declines we have seen since 2000] are likely to become more pronounced [and, as such,] it behooves anyone with exposure to the stock market to understand what is happening and [take action to] protect themselves against further 50%, and possibly larger, downsides. [This article outlines how best to do just that.] Words: 1491; Charts: 2; Tables: 1
A new financial policy initiative known by the label “Financial Repression” may soon become our worst nightmare. ‘Repression’ rhymes with ‘depression’ which could be what we have to look forward to as rampant price inflation and permanently lower living standards take hold. Get ready to be conscripted into a citizen army assembled for the greater cause of saving the nation from being swamped by a tsunami of debt. Let me explain. Words: 1585
“Regardless of whether or not you feel taxes need to be raised, a big set of tax hikes is scheduled to happen. To be sure, some of those hikes will be undone in compromises, but many if not most will sneak through.” [Let me explain.]
One of the things that’s being lost in the welter of rhetoric around the debt crises of sovereign nations is that these are not normal debtors, and government debt is not the same as personal debt. If you or I are in debt we are obliged to fulfil the terms of our repayment obligations or to go bankrupt or to pretend to die and go off and live on the life insurance. A country in the same situation has a range of other measures available to it…[Let’s explore their options and what their implications would be for the country and its citizens.] Words: 1145